Do you have the capacity to export?

Are you export ready?

Here we explore more explicit pre-export considerations, particularly around your business’s capabilities and capacity for exporting wine.

If you haven’t already completed the ‘Are you export ready?’ questionnaire, take time to do so now. It will give you a firmer grasp on your export objectives, USP, risk tolerance, cash flow, understanding of new markets and more.

Determining your capability

A successful transition from domestic production to international exporting requires you to adopt new knowledge, new resources and new skills. Your capabilities – that is, the intangible skills, expertise and abilities of your wine business – will be central to your exporting success or failure, perhaps even more so than the quality of your wine. 

Review this list of required capabilities in order to determine what new abilities and expertise you may need to acquire.

Market knowledge and cross-cultural understanding

One of the most underappreciated skills of a good exporter is cultural competency. It helps you avoid pitfalls and faux pas, and develop stronger relationships with importers, wine sellers and customers. This extends far beyond cross-cultural business etiquette, or protocols around greeting styles, gift giving and business card exchanges. Having good cultural competency also means understanding the practical intricacies of your chosen market, from compliance and logistics to marketing and pricing. 

One such example of this is price setting. Unfortunately a lot of businesses still price their exports in line with their domestic or cellar door prices, which can render them uncompetitive in markets like the USA and Canada. By failing to do your market research, your export objectives are quashed before you even begin. 

If you don’t already have this knowledge across relevant markets, then consider what you need to invest in. This could mean travelling to the region for a market visit, attending workshops, training an existing employee or partnering with someone who has experience in your chosen markets. Wine Australia’s Market Entry Programs (USA and Europe, UK and Canada) are a great way to get both strategic and in-market support. Austrade is also an excellent resource for more general export advice.

Clarity around corporate objectives

Now you plan on exporting, your corporate objectives must expand to incorporate your new goals. Your capabilities are what will allow you to achieve these corporate goals, so you must have a clear understanding of both. They should be defined by the business and be informed by strategic decision-making. They should also be realistic, with clear time frames, success metrics and incremental goals built in. For example, if your main corporate objective is to maintain sales levels domestically while penetrating two new markets across Asia-Pacific, then your capabilities must reflect this.

Reviewing your capabilities

To achieve your exporting goals, you need the capabilities to export or the capacity to broaden your existing capabilities. Here are a few important questions to answer:

• What internal strengths have the greatest impact on our business? This could be your strong production capability, your experienced marketing team, the reputation of your wine region, your award-winning winemaker, etc.
• Do we have the capability to create new resources? In addition to financial capability, you also need to consider the time needed to build out your capacity (for wine production, marketing, cultural understanding, etc.) as well as any additional expertise you need to acquire. 
• Are we a wine business full of learners? If your business already has an innate learning culture, then adapting to an exporting business model – which is a new learning experience – may be much quicker than if you have a team who are more content with legacy (or outdated) ways of working.

Do we have a compelling unique selling proposition (USP)? Being able to express the unique values and benefits of your wine and sell your brand story is fundamental to export success. 

Determing your capacity

Your export capacity, in contrast to your export capability, is your ‘ability’ to perform the task. You can have all the skills and capabilities to export, but without adequate capacity it can all be for nothing. So how much can your business absorb before it is at capacity – or in other words, how far can your current resources take you?

From financials and production output, to people-hours, marketing budgets and time spent on external functions, these must all be considered within the context of your ‘capacity’. In order to build out this capacity, you will need to commit to a variety of strategies.

Management

There needs to be management-wide commitment to fully embrace your wine-exporting decision. Ensure there is clarity around who will develop and oversee the export project (including clear lines of leadership). You will also need to get buy-in from all stakeholders before the process begins in earnest. This can be made easier by obtaining feedback and speaking to your people about capacity, finance, team training, manufacturing, scaling up production, stock levels, sales and marketing tactics, product delivery and more. Unless everyone is on the same page with your decision to export, there will inevitably be roadblocks along the way.

Finances

Exporting wine is not cheap, and there are various financial factors you need to consider to bring your wine to new markets. It is advisable to view the exporting arm of your business as a separate entity to your domestic operations, particularly in how you allocate your finances. This may involve establishing a separate export budget, or acquiring funding purely for the exporting side of your wine business. More than likely, the ‘cost of doing business’ in export markets will be more than the domestic market and also operate on a different payment structure with extended payment terms.

HR

Human resources plays a vital role in your exporting function, however few winemakers – particularly small and family-based producers – have the resources or requirements to require a separate HR department. Whether you are running HR yourself or have dedicated personnel, you need coverage across:

• Who will be leading the ‘learning’ aspect of your export operations?
• Who will act as the export champion to lead every other team member through the journey?
• How will you get buy-in from stakeholders?
• In what ways will the business need to align to new exporting goals?
• How will exporting performance be measured across the business?
• How will you develop the exporting function of your business, in terms of both personnel and scale of production?
• Who will manage the priorities across both arms of the business – domestic and international?

Communication

Since your wine business will now be operating across multiple countries and different time zones, a good communication strategy is essential. Do you and your team already have experience working across various cultures, or is that an area you will need to invest in? You will also need to clarify how your business will work outside of ‘domestic hours’ – will you have 24/7 customer service, or will you need to invest in automation functions and e-commerce tools to keep customers happy round-the-clock? 

Stock levels

Do you have enough rolling wine stock to handle domestic demand while also meeting the new demands of international markets? If not, do you have the capacity to scale up quickly? This may require not just a significant financial and time investment, but also scaling up your production and equipment. Depending on the destination market, you may need seperate, specific SKUs to suit specific market requirements.

Time frame

Your corporate goals should have set time frames against which you can measure your success. Creating a project schedule can help keep all relevant teams accountable, as it will provide clear information on when you plan to start exporting, the key milestones along the way (e.g. partnering with a wine importer), as well as any contingencies you may have in case of threats to those milestones. It’s worth noting that export projects tend to take a lot longer than expected, so be mindful of this when setting early milestones. 

Scaling up

Scaling up is an inevitable part of wine exporting, and your business should already be in a position to do so before you start exporting your products. The question is: how much can you afford to – or are you willing to – scale? Do you have the capacity to scale up domestically as well as internationally? If not, how will you meet growing local demand, and will that impact your overseas sales? Also consider the financial implications of scaling. As a winemaker this may extend beyond hiring more staff, to investing in new equipment with the capacity to produce more wine. You want to avoid a situation where you can’t supply a new export market, which can dilute all your export development work.

International competition

Your domestic success proves you have the capacity to compete. But how will you now differentiate your offering to be just as successful internationally? As an exporter, your competition grows exponentially. The world of wine is much larger than just Australian brands – you are competing against every wine producing country in the world.

While it may be far too time- and resource-intensive to analyse every competitor in your new market, it is important to spend time looking at your biggest competitors and understand what they offer. For example, this could be a specific wine producer of multiple varieties (if you plan on exporting several wine varieties at once), or a group of profitable labels that produce Chardonnay (if you plan to only export your Chardonnay). Ensure you have the capacity and flexibility to manage competitor threats.

What is your export objective?

A helpful activity is to define just one export objective – what is one of the main drivers behind exploring international markets? Using this objective as your central exporting theme can help clarify not just your capabilities and capacity, but also how you want to pursue your exporting goals over the long term.